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Business, 28.02.2020 22:45 Shobhoob

J&M Company is a real-estate developer considering a 40-unit apartment complex in a growing college town. As the area is also booming with foreign automakers locating their US assembly plants, the firm expects that the apartment complex, once built, will enjoy a 90% occupancy for an extended period. The firm already compiled some of the critical financial information related to the development project as follows:  Land price (1 acre) = $1,200,000  Building (40 units of single bedroom) = $4,800,000  Project life = 25 years  Building maintenance per unit per month = $100  Annual property taxes and insurance = $400,000 Assuming that the land will appreciate at an annual rate of 5%, but the building will have no value at the end of 25 years (it will be torn down and a new structure would be built), determine the minimum monthly rent that should be charged if a 12% return (or 0.9489% per month) before tax is desired.

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